D.C. appeals court to review decision imperiling Obamacare subsidies

In victory for Obama, full D.C. Circuit Court of Appeals agrees to review ruling on healthcare subsidies

President Obama's lawyers have won a second chance to stop a lawsuit that has the potential to unravel the national healthcare law and its system of insurance subsidies.

The full U.S. Court of Appeals for the District of Columbia said Thursday it will reconsider a 2-1 decision by a panel of the court in July that struck down the subsidies for health insurance provided under the Affordable Care Act in 36 states.

These states rely on insurance exchanges run by the federal government. In July, the two judges in the majority, both Republican appointees, said the law as written authorized subsidies for only state-run exchanges. The decision, if allowed to stand, could void insurance subsidies for about 5 million low-income and middle-income Americans.

Thursday's brief announcement may be crucial in preventing the Supreme Court from taking up the issue this fall. Conservative activists who launched the lawsuit hoped to get it before the Supreme Court as soon as possible.

But justices usually hear cases when different federal appeals courts are split on an issue of federal law. In July, an appeals court in Virginia upheld the Obama administration's defense of the healthcare subsidies on the same day the appeals court panel in Washington rejected them.

Thursday's announcement by the full D.C. Circuit to set aside the July panel ruling will lessen the chances the justices will vote to take up the issue soon.

The appeals court said it will hear arguments Dec. 17, and the administration is expecting the full court to reverse the panel's decision.

In the past year, Obama added four new judges to the D.C. Circuit Court, giving Democratic appointees a majority for the first time since the 1980s.

The legal dispute turns on a provision of the Affordable Care Act that says tax credits will subsidize insurance purchased on an exchange "established by the state." Currently, only 14 states operate their own exchanges. The rest rely on exchanges run by federal officials.

The 2-1 decision in July said the provision as written did not authorize subsides in the 36 states.

The administration's lawyers sharply disputed this interpretation. They said that the law was intended to provide subsidies nationwide and that the law allows for federal exchanges to take the place of a state exchange.